Executive summary
Table of contents
Introduction: Intro of derivatives to SA fin markets
The South African futures market started informally on an over the counter basis in 1987 and Rand Merchant Bank fulfilled the clearing house role (Alexander: 1996). According to Alexander, the Johannesburg Stock Exchange (JSE) together with commercial banks combined to set up a formal futures exchange and the South African Futures Exchange (SAFEX) exchange was eventually formed and opened for business on 30 April 1990. The Johannesburg Stock Exchange’s equity derivative section began operating in 1990 facilitating the trading of financial derivatives to the open market (Adelegan, 2009). Options’ contract trading was initiated in October 1992 and futures on agricultural commodities were available by 1995. In May 1996 the system of automated trading was fully introduced to the Futures exchange (Adelegan, 2009).
The main reasons behind the establishment of the derivative market in South Africa were to increase liquidity, improve level of risk management as well as to allow the local market to tackle challenges arising as a result of globalization (Adelgan, 2009). Two broad categories exist in the derivatives market and these are futures and options and these two categories a variety of instruments can be found which include single stock futures, warrants, financial and commodity futures (Adelegan, 2009).

Findings:
Warrants
Warrants
Warrants were first launched in South Africa in 1997. Warrants are financial instruments that are traded on the Johannesburg Stock Exchange (JSE) and they represent the right not an obligation to buy or sell the underlying asset on or before the expiry date set by the JSE (Standard Bank, no date). They entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date (Hirsch, 2009). Warrants